Who'd be in opposition? Except when facing a government clearly in its death throes, opposition must feel like a game you can never win. Call an issue wrong, and you're punished pitilessly. Call it right, and your adversary simply steals your best lines.

The past week has been a classic of its kind. Last week this newspaper carried word of an apparent shift in position by Labour. Ed Balls said he could not promise to reverse the coalition's spending cuts and tax rises, indeed his starting point was that, if returned to power, Labour would have to keep all of them. The shadow chancellor further warned the unions he too would insist on the 1% pay freeze currently imposed on all public sector workers.

Was this a smart move or a mistake? On the plus side, it brought some rare front-page attention for Labour as well as cheers from the Blairite twitterati for finally "getting real" and credible on austerity. The Labour high command were pleasantly unruffled by the initial howls of protest from the ultra-left RMT and PCS unions too: page one of the Blair playbook teaches that the easiest way for the Labour leadership to prove its cojones is to get into a brawl with its own party, ideally the unions.

Of course the Tories slammed the change as a U-turn. More serious has been the reaction among many of Labour's own supporters and among neutrals – neither praise nor condemnation, but confusion. Hadn't Labour's message been that the spending cuts were all wrong? If so, why are they now promising to stick with them?

My own fear was that the new line from Balls would drown out the old one, just as it was beginning to break through. Until last week, Balls had been known as the loudest, sometimes sole, voice against the austerity consensus. Since the leadership campaign of 2010, he had been resolutely keeping the Keynesian flame, warning that cutting in a recession only deepens that recession, strangling an economy just when it needs to be stimulated.

For a while, he was dismissed as a deficit-denier. But then came the series of anaemic growth figures and finally George Osborne's autumn statement admission that the coalition would break its defining promise. It would not, after all, clear the deficit by 2015 but would be borrowing £158bn more than planned, thanks to an economy still flatlining. What's more, this year began with the number that will determine the US election more than any of the current polls: a sharp drop in US unemployment. The Obama administration has refused to follow the Osborne cult of austerity – and its approach is paying off.

In other words, at the very moment Balls's insistence on Keynesian stimulus was being vindicated by events, he had confused the message. Now the headline writers could cry U-turn and the coalition claim him as one of its own. Balls looked as if he was doing what Captain Schettino apparently refused to do – climb on board a sinking ship.

Part of the problem was the timing. I'm told that Balls planned this move for February, against the backdrop of next week's growth figures and in the lead-up to a budget. There are whispers Standard & Poor's is privately warning that it might soon downgrade the UK's credit rating – a grievous blow to Osborne's standing. This was the context in which the shadow chancellor originally hoped to move. But Labour's poor start to the new year and bad poll numbers sent a tremor of panic through the party's top table and the timetable was accelerated.

As it happens, the confusion can easily be cleared up. There is, in fact, no contradiction. Put simply, Labour still argues that, were it in charge now, it would be cutting less far and less fast and implementing its own plan for growth. But, since Labour is not in charge now, if elected in 2015 it will have to clear up the mess Osborne leaves behind – a mess that will be bigger and dirtier because of the coalition's current misguided strategy. And that means Labour will have no money to splash around reversing cuts or lowering taxes.

Which brings us to the themes articulated by Ed Miliband. For him, the new fiscal realism leads logically to calls for a more responsible capitalism. Since the two Eds won't be able to repeat the old Blair/Brown trick, addressing myriad social problems by spending money, they will have to find other ways to improve our national life – ways that don't require cash. Hence his speech this week casting Labour as a consumer champion, railing against a rigged energy market, sky-high train fares and what he called the "surcharge culture". Hence his demand for action on high pay at the top and for a living wage for those at the bottom. And hence his admiring glance back to the New Labour approach of 1997, when every spending promise came from a specific, earmarked source.

Back then it was a windfall tax on the utilities to get the unemployed into work. Now it's a bank bonus tax to fund help for the young jobless. But the common thread is the same, action that is budget neutral. Or, to use the phrase the Labour leader believes might frame his offer to the country at the next election, "Fairness in tough times".

The trouble is, no sooner was Miliband on his feet than Cameron was making a speech on the exact same terrain – with a louder megaphone. Sure, Labour will argue that Cameron is all talk, no substance; that he only moves tactically, saying what has to be said to neutralise that week's issue. Labour can argue that, if you want to know what this government really cares about, what its true priorities are, even in this time of austerity, look no further than its proposed royal yacht.

It can say all that, but not many are listening. With a press corps that is largely hostile, many of whom have written off the leader as a no-hoper, it is devilishly hard to advance any argument. When your party has come off 13 years in office, it is even harder. Who would be in opposition?